Posted by SusanOH on 5/4/06 8:59am
Msg #117679

Last nights closing

Just wondering if any of you have ever experienced this. I did a closing last night that was an Arm, the first change date was in 2008, but prepayment penalty was for 36 months. So If these people try to refiance at the end of their 2 yr arm they are going to be hit with a penalty no matter what. The only scenario I can think of is perhaps they will refinance with the same lender thus avoiding the penalty. I'm not sure if this is the way this lender works but I know it is with some lenders. And yes it was a higher then normal interest rate. Not an Ameriquest. Just curious.

Reply by NCLisa on 5/4/06 9:13am
Msg #117683

I had one with a 24 month prepay penalty, and it was a 2 year fixed rate Arm, so these borrowers would be hit with higher interest rates for a month or 2. My borrower, kept all his notes while talking to the LO, and they had agreed to refi him in a year. So he was a bit miffed about the prepay.

There seem to be several lenders out there that have deciced to compete with and do business like Ameriquest.

Reply by Kimberly_IN on 5/4/06 9:54am
Msg #117699

I've seen that, Susan. Not often but I have seen it.

Reply by Shane_OH on 5/4/06 9:56am
Msg #117700

This is VERY VERY common, nothing to concerned about.

3 yr prepays with a 2 year arm... you'll see 5 year prepays with a 3yr arm as well..
And from my experience as a LO in the past, even if they refinance with the same lender, they will get hit with the prepayment penalty....rare occasions where it is waived.

Reply by Anonymous on 5/4/06 1:01pm
Msg #117753

We don't have enough information to make a judgement (not that anyone here would make a judgement). Two year arms are generally subprime loans. The longer the prepay the better the rate... When you are dealing with subprime loans the rates are so high as it is, that a three year prepay could save them a .250 point or more and this could be the difference between qualifying for the payment or not qualifying for the payment...
However, I'm sure there are sharks out there who are hitting people with a 3 yr. prepay who don't need it to qualify.... Just a little something extra to think about...